HOA Rental Caps
The challenging economy is taking a toll on many homeowners. Owners who had no intention of renting their homes a year ago, are now looking at renting their homes as a viable alternative to selling their property in a deteriorating market. As a result, many self-managed homeowners’ associations are considering whether or not their community needs a rental cap. If your HOA board is struggling with this decision, there are a few questions you should ask yourself.
Have you made every effort to involve the renters in your community? Renters should be engaged in the same way that homeowner’s are engaged, with the one obvious exception – they cannot vote. What are the real reasons for considering a rental cap? What toll will a rental cap have on responsible owners in your community who may have lost a job and can no longer afford their home?
Sommerville Estates is a community of thirty-two homes. Sixteen of which are rentals and two more are in the process of being foreclosed upon. Sommerville is considering a rental cap for some very valid reasons. Historically most of Sommerville’s covenant violations emanate from the community’s rental properties and the absentee homeowners virtually ignore the fines and processes. The steps to cure the violations are slower with rentals than other homes. With half the homes in their community looking shabby, the overall property values are impacted.
Perhaps more importantly, Sommerville is losing its voting membership. Most rental owners are “absentee” not attending meetings or engaging in the neighborhood. Gaining quorums for annual or special membership meetings is next to impossible…making conducting business extremely difficult. Clearly this also impacts the eligibility of residents to serve on the board of directors too.
So if your community is at the point where you must consider a rental cap… now what? Your association board cannot simply pass a rule or resolve to change the policy. Rental caps materially change the homeowners’ rights regarding property use. Your community will need to seek input from all homeowners and will need to garner enough support and votes from the owners to change the declaration. This will not be an easy feat, but it is possible. You may need to launch a full-scale campaign informing owners of the rationale, needs and benefits of a proposed cap. You will likely have to grandfather in many existing rentals and clearly explain any policies in regard to exceptions for extreme hardship cases. You may need to meet with absentee homeowners personally to discuss their concerns and explain the benefits of the cap.
The jury is still out on what is the “appropriate” percentage for the cap. Typically, caps seem to fall somewhere between 10 and 30 percent. However, this is something your community will need to determine for itself. Lastly, if you are successful in the effort to legally amend your declaration to include a rental cap, don’t forget to file copies of the amended declaration with the county clerk’s office.